Facts of the case

In 1981, Mobil Oil Exploration & Producing Southeast, Inc. and Marathon Oil Co. both paid the Federal Government over $150 million in return for the rights to explore for and develop oil off the coast of North Carolina, provided that the companies received exploration and development permissions in accordance with the Outer Continental Shelf Lands Act (OCSLA), the Coastal Zone Management Act of 1972 (CZMA), and the regulations promulgated pursuant to OCSLA and CZMA. In 1990, the companies submitted an exploration plan, as required by OCSLA and CZMA, to the Department of the Interior for approval. Thereafter, the Outer Banks Protection Act (OBPA) became effective. The OBPA prevented the Secretary of the Interior from approving the exploration plan for at least 13 months. The state of North Carolina then objected to certification of the companies' plans under the CZMA. Before the Secretary of Commerce rejected Mobil's request to override North Carolina's objection, the companies filed a breach-of-contract lawsuit. In granting summary judgement for the companies, the Court of Federal Claims found that the Federal Government had broken its contractual promise to follow OCSLA's requirement to approve an exploration plan that satisfied OCSLA's requirements within 30 days of the plan's submission, which constituted the repudiation of the contract and entitled the companies to restitution of the payments. In reversing, the Court of Appeals concluded that the Federal Government's refusal to consider the companies' final exploration plan was not the operative cause of any failure to carry out the contracts' terms, because North Carolina's objection would have prevented the companies from exploring.

Question

Does the enactment of a new statute, which prevents the Federal Government from following a contractual promise to follow the terms of pre-existing statutes and regulations, constitute the repudiation of a contract?

William H. Rehnquist:

The opinion of the Court in No. 99-244, Mobil Oil Exploration & Producing Southeast versus United States and a companion case will be announced by the Justice Breyer.

Stephen G. Breyer:

In 1981, two oil companies paid the government $156 million upfront for lease contracts that gave them the right to explore for offshore oil, but only if various government departments following certain standards and deadlines that were all referenced in the contract only if those government departments approve the exploration and drilling plans.

Then Congress, later passed specific legislation that changed those referenced deadlines and standards making it more difficult for the companies to obtain the necessary approvals that the contract said were required.

So the companies then asked for their money back.

They sued for restitution.

The Court of Claims said that the crossed referenced deadlines and standards were essential parts of the contract; they asked but what else did the companies buy for $156 million and the United States, it added, by changing those deadlines and standards in a significant way repudiated the contracts and it had to give the companies their money back.

The Court of Appeals reversed, it thought that the deadline changes didn’t hurt the companies because they would not have gotten the necessary approval anyway.

Well, we now reverse the Court of Appeals.

We think that whether the companies would or would not have gotten the necessary approvals anyways beside the point, the companies aren’t asking for damages, they just want their money back.

If a lottery operator fails to give you a ticket that you buy, you get your money back even though you never would have won the lottery.

The operator didn’t give you your chance of winning that you paid for and that’s true irrespective of whether that chance would eventually have led to a win.

The same is true here, the statutory changes in the deadlines were important to the companies.

They amounted to years of the additional delay and in those circumstances the government is insisting upon the contrary to contract changes, however justified that statute may have been as a matter of policy, amounted to a repudiation of the government’s basic contract with the companies.

They didn’t waive their rights in our view and elementary principles of the Contract Law and Restitution Law therefore say that the Government has to give them the money back that they put upfront.